Evaluating Inflation Pass-Through from Disaggregated US Producer Price Indices

US inflation has reached its highest level in decades with academics and the media alike citing supply chain distortions and shortages in key commodities as the driving factors. While some work has been done evaluating the pass-through (PT) of producer to consumer prices, evidence in the aggregate has been mixed and lacks direct quantification. We seek to quantify the aggregate PPI PT coefficient and causal direction of producer to consumer prices. We further disaggregate PPI down to commodity-specific indices to quantify disaggregated PT coefficients. By estimating an augmented Phillips curve, we find short-run PT of aggregate PPI is around 0.07. Using a VAR framework, we conduct Toda-Yamamoto tests that show evidence of bidirectional causality between CPI and PPI inflation. When disaggregating down to commodity-specific PPIs, we find several PPI series that exhibit cost-push unidirectional causality and express stronger pass-through coefficients than the aggregate. Furthermore, via rolling forecasts, several disaggregate PPI series offer more forecast precision than aggregate PPI